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Every year Applicable Large Employers (ALEs) must file and furnish their ACA information to the IRS and their employees, respectively. Failing to do so can result in significant IRS penalty assessments.
Employers, as 2020 begins to wind down, be sure you meet the following IRS deadlines for complying with the ACA’s Employer Mandate. Mark your calendars for the following dates:
February 28, 2021: Paper file your 2020 Forms 1094-C and 1095-C with the IRS no later than this date.
March 2, 2021: Furnish Forms 1095-C to your full-time employees no later than March 2, 2021. This date was originally January 31, 2021, but the IRS has since issued an extension.
March 31, 2021: Employers must electronically file the 2020 Forms 1094-C and 1095-C with the IRS no later than this date. (As a note, for California employers, this is also the deadline for Pay Data Reporting.)
Failing to meet these deadlines can result in penalties under IRC 6721/6722, which the IRS is issuing through Letter 972CG. If you receive one of these notices, you only have 45 days from the issue date to respond to the penalty notice.
For the 2020 tax year, the penalties associated with failing to comply with IRC 6721/6722 for employers with average gross receipts of more than $5 million in the last three years are as follows:
Failure to timely file and furnish correct information returns
If employers file ACA information returns with the IRS no more than 30 days after the deadline they could be subject to a $50 penalty per return not filed, not to exceed an annual maximum of $556,500. If the ACA information returns are 31 or more days late, up to August 1, 2021,, the penalty per return jumps up to $110, not to exceed an annual maximum of $1,669,500. After August 1, the penalty amount steepens to $270 per return, not to exceed an annual maximum of $3,339,000. For intentional disregard, meaning the deadline was missed willfully, the penalty more than doubles to $550 per return with no annual maximum limit.
The penalty amounts for employers with gross receipts of $5 million or less in the last three years will have the same penalty amounts per return with lower annual maximums, except in the case of intentional disregard. For more information on the penalty schedules for failing to meet the IRS deadlines click here.
As if the penalties for failing to meet the filing and furnishing deadlines weren’t enough, the IRS is also issuing penalties to employers that fail to comply with the ACA’s Employer Mandate. As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA’s Employer Mandate, Applicable Large Employers (ALEs), organizations with 50 or more full-time employees and full-time equivalent employees, are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is affordable for the employee, or be subject to Internal Revenue Code (IRC) 4980H penalties. These penalties are being issued through IRS Letter 226J.
Organizations should consider having a cost-free ACA Penalty Risk Assessment performed to discover their potential exposure. With less than 30 days left in the year, employers can measure their ACA penalty risk before submitting their filings to the IRS.
